2011-10465. Notice of HUD-Held Multifamily Loan Sale (MLS 2011-1)

AGENCY:

Office of the Assistant Secretary for Housing—Federal Housing Commissioner, HUD.

ACTION:

Notice of sale of mortgage loans.

SUMMARY:

This notice announces HUD's intention to sell certain unsubsidized multifamily mortgage loans, without Federal Housing Administration (FHA) insurance, in a competitive, sealed bid sale (MLS 2011-1). This notice also describes generally the bidding process for the sale and certain persons who are ineligible to bid.

DATES:

The Bidder's Information Package (BIP) was made available to qualified bidders on March 30, 2011. Submissions of bids for the loans were required by the bid date, which was April 27, 2011. Awards were made no later than April 28, 2011. Closings are expected to take place by May 6, 2011.

ADDRESSES:

To become a qualified bidder and receive the BIP, prospective bidders must have completed, executed, and submitted a Confidentiality Agreement and a Qualification Statement acceptable to HUD. Both documents were available on the HUD Web site at http://www.hud.gov/​fhaloansales. Executed documents were mailed and faxed documents to KDX Ventures: KDX Ventures, c/o The Debt Exchange, 133 Federal Street, 10th Floor, Boston, MA 02111, Attention: HCLS 2011-1 Sale Coordinator, Fax: [phone].

FOR FURTHER INFORMATION CONTACT:

John Lucey, Deputy Director, Asset Sales Office, Room 3136, U.S. Department of Housing and Urban Development, 451 Seventh Street, SW., Washington, DC 20410-8000; telephone [phone], extension 3927. Hearing- or speech-impaired individuals may call 202-708-4594 (TTY). These are not toll-free numbers.

SUPPLEMENTARY INFORMATION:

HUD announces its intention to sell in MLS 2011-1 certain unsubsidized mortgage loans (Mortgage Loans) secured by multifamily properties located throughout the United States. The Mortgage Loans were comprised of non-performing mortgage loans. A final listing of the Mortgage Loans was included in the BIP. The Mortgage Loans were sold without FHA insurance and with servicing released. HUD offered qualified bidders an opportunity to bid competitively on the Mortgage Loans.

The Mortgage Loans may be stratified for bidding purposes into several mortgage loan pools. Each pool contained Mortgage Loans that generally had similar performance, property type, geographic location, lien position and other characteristics. Qualified bidders could submit bids on one or more pools of Mortgage Loans or could bid on individual loans. A mortgagor who was a qualified bidder was permitted to submit an individual bid on its own Mortgage Loan. Interested Mortgagors were able to review the Qualification Statement to determine whether they were eligible to qualify to submit bids on one or more pools of Mortgage Loans or on individual loans in MLS 2011-1.

The Bidding Process

The BIP described in detail the procedure for bidding in MLS 2011-1. The BIP also included a standardized non-negotiable loan sale agreement (Loan Sale Agreement).

As part of its bid, each bidder was required to submit a deposit equal to the greater of $100,000 or 10% of the bid price. In the event the bidder's aggregate bid was less than $100,000.00, the minimum deposit was not less than fifty percent (50%) of the bidder's aggregate bid. HUD evaluated the bids submitted and determined the successful bids in its sole and absolute discretion. If a bidder was successful, the bidder's deposit was non-refundable and was applied toward the purchase price. Deposits were returned to unsuccessful bidders. Closings are scheduled to occur by May 6, 2011.

These were the essential terms of sale. The Loan Sale Agreement, which was included in the BIP, contained additional terms and details. To ensure a competitive bidding process, the terms of the bidding process and the Loan Sale Agreement were not subject to negotiation.

Due Diligence Review

The BIP described the due diligence process for reviewing loan files in MLS 2011-1. Qualified bidders were able to access loan information remotely via a high-speed Internet connection.

Mortgage Loan Sale Policy

HUD reserved the right to add Mortgage Loans to or delete Mortgage Loans from MLS 2011-1 at any time prior to the Award Date. HUD also reserved the right to reject any and all bids, in whole or in part, without prejudice to HUD's right to include any Mortgage Loans in a later sale. Mortgage Loans will not be withdrawn after the Award Date except as is specifically provided in the Loan Sale Agreement.

This was a sale of unsubsidized mortgage loans, pursuant to Section 204(a) of the Departments of Veterans Affairs and Housing and Urban Development, and Independent Agencies Appropriations Act of 1997, 12 U.S.C. 1715z-11a(a).

Mortgage Loan Sale Procedure

HUD selected a competitive sale as the method to sell the Mortgage Loans. This method of sale optimizes HUD's return on the sale of these Mortgage Loans, affords the greatest opportunity for all qualified bidders to bid on the Mortgage Loans, and provides the quickest and most efficient vehicle for HUD to dispose of the Mortgage Loans.

Bidder Eligibility

In order to bid in the sale, a prospective bidder was required to complete, execute and submit both a Confidentiality Agreement and a Qualification Statement acceptable to HUD. The following individuals and entities were ineligible to bid on any of the Mortgage Loans included in MLS 2011-1:

(1) Any employee of HUD, a member of such employee's household, or an entity owned or controlled by any such employee or member of such an employee's household;

(2) Any individual or entity that is debarred, suspended, or excluded from doing business with HUD pursuant to Title 24 of the Code of Federal Regulations, Part 24, and Title 2 of the Code of Federal Regulations, Part 2424;

(3) Any contractor, subcontractor and/or consultant or advisor (including any agent, employee, partner, director, principal or affiliate of any of the foregoing) who performed services for, or on behalf of, HUD in connection with MLS 2011-1;

(4) Any individual who was a principal, partner, director, agent or employee of any entity or individual described in subparagraph 3 above, at any time during which the entity or individual performed services for or on behalf of HUD in connection with MLS 2011-1;

(5) Any individual or entity that uses the services, directly or indirectly, of any person or entity ineligible under subparagraphs 1 through 4 above to assist in preparing any of its bids on the Mortgage Loans;

(6) Any individual or entity which employs or uses the services of an employee of HUD (other than in such employee's official capacity) who is involved in MLS 2011-1;

(7) Any affiliate, principal or employee of any person or entity that, within the two-year period prior to April 1, 2011, serviced any of the Mortgage Loans or performed other services for or on behalf of HUD;

(8) Any contractor or subcontractor to HUD that otherwise had access to information concerning the Mortgage Loans on behalf of HUD or provided services to any person or entity which, within the two-year period prior to April 1, 2011, had access to information with respect to the Mortgage Loans on behalf of HUD;

(9) Any employee, officer, director or any other person that provides or will provide services to the potential bidder with respect to such Mortgage Loans during any warranty period established for the Loan Sale, that (x) serviced any of the Mortgage Loans or performed other services for or on behalf of HUD or (y) within the two-year period prior to April 1, 2011, provided services to any person or entity which serviced, performed services or otherwise had access to information with respect to the Mortgage Loans for or on behalf of HUD;

(10) Any mortgagor or operator that failed to submit to HUD on or before March 31, 2011, audited financial statements for fiscal years 2007 through 2010 (or for such time as the project has been in operation or the prospective bidder served as operator, if less than three (3) years) for a project securing a Mortgage Loan;

(11) Any individual or entity and any Related Party (as such term is defined in the Qualification Statement) of such individual or entity that is a mortgagor in any of HUD's multifamily and/or healthcare housing programs and that is in default under such mortgage loan or is in violation of any regulatory or business agreements with HUD, unless such default or violation is cured on or before January 31, 2011.

Prospective bidders were encouraged to carefully review the Qualification Statement to determine whether they were eligible to submit bids on the Mortgage Loans in MLS 2011-1.

Freedom of Information Act Requests

HUD reserves the right, in its sole and absolute discretion, to disclose information regarding MLS 2011-1, including, but not limited to, the identity of any successful bidder and its bid price or bid percentage for any pool of loans or individual loan, upon the closing of the sale of all the Mortgage Loans. Even if HUD elects not to publicly disclose any information relating to MLS 2011-1, HUD will have the right to disclose any information that HUD is obligated to disclose pursuant to the Freedom of Information Act and all regulations promulgated thereunder.

Scope of Notice

This notice applies to MLS 2011-1 and does not establish HUD's policy for the sale of other mortgage loans.

Dated: April 22, 2011.

Robert C. Ryan,

Acting Assistant Secretary for Housing - Federal Housing—Commissioner.